The UK government last month announced an audacious plan in how to increase the size of the mutuals and co-operatives sector. This sector has increased to an estimated 8,400 co-operative and community benefit societies. The new Labour government has promised to double the size of this emerging sector. This vibrant sector is made up of a multitude of organizations including housing associations, social clubs, and retail societies.
Financial mutuals, including insurers, building societies and credit unions, have close to 30 million members. Combined, they control over £223 billion in assets. The government is seeking to build on this development following a year-long review of the sector. This review revealed that most mutuals struggle to scale operations, invest in cutting edge technologies, and compete strategically with private corporations. This review should have started post-2024 election, in line with Labour’s manifesto commitment.
City regulators have rolled out a number of changes aimed at encouraging innovative development in the mutuals and co-operatives space. The champions are the establishment of a mutual societies development unit. This new unit will help fund the mission-driven organizations that can be vital lifelines in local communities.
The Department for Business and Trade has launched a new consultation process. This campaign will help them and other non-financial mutuals and businesses that want to convert to co-operative ownership models. These changes are intended to reduce regulatory burden and provide a more conducive environment for growth and sustainability in the industry.
Two building societies notably diversified last year by acquiring retail banks, exemplifying a trend in the sector towards expansion and adaptation.
“Mutuals are an important contributor to the economy, to communities, to consumer trust and financial inclusion. They have got a long history of focusing on value and choice, often to underserved communities and markets.” – Nikhil Rathi
The recent review itself acknowledges the challenges mutuals have been notably their capacity to grow their operations. Laura Wallis noted, “Some mutuals may determine that mergers may be a mechanism for gaining scale to maintain the provision of services for their members.” This declaration further highlights the collaborative spirit between mutuals as means to prosper together in the long run.
Nikhil Rathi emphasized the social importance of mutuals, stating, “While these underserved communities may be – in terms of the aggregate GDP – quite a small number, it’s an important part of society. We certainly don’t want a digital divide in which people are left behind, unable to gain access to essential products and services. I feel like those mutuals are really pivotal for not just financial inclusion, but that bonding agent in society and in our communities.
This breaks with the government’s mutuals ambition — to broaden the mutual sector. It aims to increase financial inclusion and improve community resilience. We want to make sure that these organizations can succeed by the federal government’s side. This support will bolster local economies and help deliver critical services often neglected by traditional financial institutions.